Some people change history by accident, and Niklas Zennstrom counts as one of them. This soft-spoken and still largely unknown Swede, described by the Washington Post as a “younger, hipper version of Bill Gates,” started two small companies in the early 2000s that have already done much to change how people exchange information in the twenty-first century. His first company created a filesharing software application called “Kazaa” that was destined to become the most downloaded program in history. Millions of people used Kazaa to exchange billions of songs in open defiance of national copyright laws. This chapter chronicles the filesharing movement, in which Zennstrom and Kazaa played a big role. At its height this movement led many to believe that filesharing might upend the central role of national copyright law in the distribution of information. With the benefit of hindsight, we can now see that this was not to be. And so in part, this chapter is a sequel to chapters 5 and 6, showing again the importance of law and national government, even for filesharing—a technology designed to be impossible to control. This chapter also introduces a crucial new theme: the effect of technological change on the market and the legal system. Filesharing introduced a cheaper method of distributing music that sparked massive changes in the economics of music distribution and the behavior of consumers. These changes were a jolt to the copyright law system that seemed to many to render it irrelevant. What appeared a threat to copyright law, however, turned out simply to be the law’s hesitation and adjustment in the face of a massive battle between the recording industry, technological upstarts, and music consumers over the spoils of a better music distribution system made possible by the Internet. As the 1990s ended, the music recording industry’s mood was optimistic. A new and sturdy technology, the compact disc, anchored the best decade of sales ever. A handful of major labels, a textbook oligopoly, exercised near total control over the distribution of music. And while the industry faced considerable expenses in the development and marketing of new artists, existing music cost little to manufacture and could be sold for up to $20 per album. The recording industry was rich, powerful, well-connected in Congress, and uninterested in changing a successful business model.
